Making international mobility work in the current global economy.
By Katie Kuehner-Hebert
The economic downturn in the U.S. and Europe put a dent in the international relocation assignments of many companies, though a fair amount are now recovering—or even expanding—their programs. Still, most companies with global operations have streamlined their relocation strategies to cut costs, and providers are offering additional administrative support to aid them, including analytics to better estimate relocation costs. Some providers are also recommending ways to ease some of the burdens created by the downturn, like decreased house values and underwater mortgages.
Kathleen Morris, vice president of client services international at Prudential Real Estate and Relocation Services, says that there was a significant decrease in international assignments across the board for Prudential’s global clients in 2009 and 2010, but there has been some pickup this year.
“Regardless of the U.S. and global economy, there is increasing pressure on U.S. companies in particular to globalize…and many of our clients are going into emerging markets and building their customer base,” Morris says. “I think there is a perceived greater opportunity and greater ability to increase market share outside the U.S. right now, in part because of economic conditions, especially within the U.S. where there is perceived less opportunity to increase market share.”
The most popular emerging markets for U.S. companies are Brazil, eastern European countries, India, and China for several reasons, notes Neil Krupp, vice president of HR consulting and global compensation services at TheMIGroup in Chicago. Lowered labor costs, corporate tax breaks, and consumer demand for U.S. products and services that had not previously been available are just at few of the incentives.
“As is typically the case in mobility, when there is a downturn in one geography, it is counterbalanced by an upturn in another area of the world,” says Krupp, who adds that he has seen an increase in mobility activity over the past year by companies expanding in these markets.
One of TheMIGroup’s clients, Lenovo, experienced a slight downtick in international assignments during the recession, but its activity has since rebounded, says Melissa Allen Lesley, director of executive compensation and global mobility for the computer company.
“Obviously the economic downturn a few years ago affected Lenovo just like it did any other company, and we adjusted the number of international assignments accordingly,” Lesley says. “But today we’re right where we want to be, and international assignments are a key part of our investment in talent development for both the short- and long-term health of the company.”
Lesley says that Lenovo has been partnering with TheMIGroup since 2005, and the group has generally been a very strong partner in times of prosperity as well as challenging times.
“They are great at partnering on difficult and challenging cases—always proactive in issue management and resolution,” she says. “They go out of their way, for example, to personally meet face-to-face with some of our assignees and their families to ensure the transition to living in a new place goes smoothly and without issue.”
While many companies are returning to their previous level of assignments, a good number still either shorten their assignments or change the employee’s status from long term to “permanent transfer,” says Jennifer Thomas, a global relocation expert at Graebel Relocation Services Worldwide Inc. That way, companies have the option to lessen relocation benefits, such as the time period they pay for school tuition for the assignee’s children.
“It’s really dictated by the industry. Tech companies are increasing their permanent transfers and having fewer long-term assignments,” Thomas says. “Financial services still have more temporary assignments, both long term and short term.”
Craig Selders, president of Paragon Relocation, says more of his clients are sending their employees to other countries for project-based work. In such cases like building the required infrastructure to manufacture, distribute, and sell their products and services, employees either stay until the project is completed, or until they can hand over supervision of the project to someone else.
While it might be wise for companies to shorten the time abroad, sometimes it’s a misconception that it’s always the most cost-effective, Krupp says.
“In many cases, one short-term assignment is ultimately followed by a second, or extending the length of the original assignment, and incrementally the cost becomes more than originally anticipated,” he says. “For example, a company may follow a practice of rotating individuals in and out of a country every six months, but that person doesn’t complete the desired tasks so a second person comes in, resulting in increased costs.”
Some companies have tiered programs representing various relocation entitlements based on the employee’s position in an organization, Krupp says. For example, a junior-level employee might not be entitled to a pre-visit trip, whereas an executive would be given that option, accompanied by his or her family for perhaps seven days or so “to get a look see.”
Lesley says that Lenovo has neither shortened nor amended its relocation benefits policies during the economic downturn. Becoming more and more common, the company first looks within its internal pool of candidates for relocation to another country. Paragon’s Selders says companies may hire a new employee with specialized skills for a niche position abroad, but the general rule of thumb is to relocate existing employees with known track records within the company.
As companies strive to maintain tight budgets, providers are aiding them with administrative support backed up with analytical programs.
“We’ve seen the HR administrators tasked with preparing and overseeing assignments getting more volume, but with less staff to do it,” says Tim Callahan, Graebel Relocation Services Worldwide Inc.’s president and chief operating officer of Graebel Companies Inc. “So we offer our clients the ability to work on our system with compensation management, cost estimating—all kinds of analytics to keep track of the expense spending.”
For instance, the system tracks the frequency and magnitude of exception requests, such as when an assignee with a $20,000 housing allowance requests additional funds to transition from temporary to permanent living.
Selders says Paragon offers advanced services for individuals requiring additional aid because of the economy.
“For example in the U.S., we would want to make sure our clients understand the challenges that exist with regard to transferring somebody who has a home to sell, but with little or no equity in the home,” he says. “We would suggest to the client to update their policies to consider providing additional assistance to those people, otherwise they may not be able to relocate.”
Providers are offering analytical programs or services to determine cost estimates before employees are relocated.
“We do the analysis so they can make better business decisions on whether the assignment would have a greater return on investment,” Krupp says. “Additionally we are always striving to be more consultative when offering advice on structuring various policy entitlements to suit their business objectives and growth plans.”
Moreover, TheMIGroup continually evaluates its preferred providers that the firm has sourced globally in areas such as visa and immigration, language and cross-cultural training, and temporary accommodations, to validate that they remain the best in quality of service as well as value, he says.
“We recognize that they may be the best today but that could easily change next year, so we are constantly evaluating and reevaluating,” Krupp says.
Prudential’s Morris says that clients like to keep updated on relocation trends of other companies, particularly their competitors.
“It helps our clients understand what is happening in the marketplace, especially if we can cull the information down to their industry, so they know how competitive their programs are,” she says. “We provide that information because they need to make good business decisions about policies and programs. There are a lot of changes going on and there is a war on talent.”
Even in the economic downturn, an increasing number of companies are also looking to providers for cross-cultural training to aid their employees and families adjust to different cultures, Morris says.
“The success of the assignment is dependent upon the employee’s ability to function in that culture and understand that culture,” she says. “Anyone that moves from one country to another will experience culture shock, so the ability for the employee and his or her family to manage through that culture shock and get to a productive state as quickly as possible is dependent upon the support mechanisms we get and the training we provide.”
It’s also cost-effective to maintain other support programs, such as “settling-in services,” in which providers offer employees and their families support in finding a nearby grocery store, help in registering with local authorities, obtaining Social Security cards or tax ID numbers, opening bank accounts, enrolling their children in schools, she says.
“These days more than ever, while companies are extremely cost-conscious, they are looking to spend their dollars in the most productive way possible,” Morris says. “So adding family service is an additional cost, companies are recognizing that they are crucial to the success of the assignment—spending a little more might save millions on the back end.”
Technology: Enhancing International Mobility
Relocation companies are enhancing their technology offerings to make assignment activities more efficient for clients and their employees: Analytical programs better estimate then monitor relocation costs, self-service software-as-a-service (SaaS) online portals better manage the move, and now, mobile apps for smart phones get necessary information in a pinch.
TheMIGroup’s Krupp, says his firm employs a software program to analyze the financial implications of relocating before it happens, getting expenses associated with each of the entitlements, based on the parameters of the policy.
“We also look at salary of person—it could be taking up to $750,000 to relocate them, so it’s better to prepare for that sticker shock,” Krupp says. “We also suggest other ways to save money. If the assignment is for a shorter time period such as six months, we look for our suppliers who can find living accommodations on a month-to-month basis, and not a year lease.”
The MIGroup, like other providers, is also now providing self-service portals using an SaaS model that enables clients and their employees to track and manage relocation activities from remote locations.
Callahan of Graebel Companies says an online portal helps employees more quickly file and receive reimbursements for expenses.
“Clients also have a need for visibility for all assignees around the globe, and what that is costing them in every category,” Callahan says. “They need a comprehensive system to tackle all of those costs, because it’s now really integral to all of the companies’ business plans. HR managers want more information on where this money is going and whether they are getting the bang for their buck.”
Grady Ligon, chief information officer at Prudential Real Estate and Relocation Services, says that his firm has a software program that tracks purchases of homes in its inventory or in its clients’ inventories. The program also tracks the status of movement of the assignees’ household goods and the status of assignee reimbursements.
Prudential has a single copy of its software running on its server, and all the clients and their transferees go to the same place, Ligon says.
“The reason why this is important is that it consolidates all of the information and so it’s more timely and accurate, as close to real-time as possible,” he says.
Paragon Relocation’s Selders says that his firm’s clients not only have access to its online portal 24/7, but also a 24/7 help desk support system.
“If the person is transferring and they are having difficulty getting online and checking the information, they can contact their 24/7 entity and be able to get support immediately,” Selders says.
Graebel also has a mobile app that allows assignees to use their smart phones to access all the necessary information, submit their expenses, track expense reports and approvals, and review if household goods are moved on schedule, says Jennifer Thomas, Graebel’s senior vice president.
“The need for speed, quick answers, information available at their fingertips, to give both clients and their employees the ability to react and move very quickly, has increased over the years,” Thomas says. “It ties in with the general notion that organizations are expecting more out of their employees, so employees need to move very quickly when they relocate. So slow technology or problems with accessing their information using technology can’t be bogging them down.”